Austan Who?

Given the state of the economy, Obama’s new Chairman of the Council on Economic Advisers might need the improv comedian talents more than anything.

But what might not show up in the quick list of resume references is an interesting story Goolsbee and Jonathan Guryan (both professors of economics at the U. of Chicago) penned for Education Next in 2006:

Ostensibly a very unsexy analysis of the federal government’s multi-billion-dollar E-Rate program, launched in the Clinton Administration, the article is a neat peak into Goolsbee’s economic mind (or, at least half of it) – giving some tantalizing insights, perhaps, about how we got a Race to the Top in education.

(Since Goolsbee was Obama’s chief economics adviser during the 2008 campaign as well as part of the Hyde Park Pack, it surely wouldn’t surprise me to learn that he had helped devise the RttT strategy. But I would appreciate knowing more about that if anyone wants to enlighten me.)

“The good news about the E-Rate program,” wrote Goolsbee and Guryan in their EdNext study, which examined the E-Rate rollout in California, “is that it clearly helped to narrow the digital divide among schools… The bad news, though, is that the additional investments in technology generated by E-Rate had no immediate impact on measured student outcomes.”

Oops.

Interestingly, though, Goolsbee and Guryan saw the E-Rate program as “a model for how to induce school `reform’ through a scaled incentive system.” Sound familiar?

Here are few other salient excerpts from the story:

[E-Rate] did not provide preselected technology to schools or cover 100 percent of the price when schools made their own purchases. Instead, E-Rate subsidized schools’ purchases of approved technology. Requiring schools to foot part of the bill, it was believed, would encourage them to make only those purchases that they saw as having some value to them.

….

Our data… confirm that E-Rate funding in California through 2001 went disproportionately to schools with higher poverty rates.

….

The additional spending by poorer districts during E-Rate’s first three years dramatically narrowed the digital divide.

….

We found that the bigger the subsidy, the more a school increased its growth rate of Internet access over what it would have invested without the subsidy.

….

All schools did not respond to the incentive in the same way. Rural schools proved to be much less responsive to the subsidy program than urban schools, perhaps because they faced higher prices for Internet services or were unable to get the T1 broadband at all, which would have meant that their total cost for new investment would have been greater despite their having higher subsidy rates.

….

[S]chools that are heavily black and Hispanic were more responsive to the subsidy than schools with mostly white and Asian student bodies. Perhaps schools with larger minority populations were more budget constrained and therefore more responsive to the subsidy rate.

But then there’s this scary observation:

The subsidy costs more than two billion dollars per year, and the subsidies may lead schools to get locked into inferior technologies or, at the least, lead them to buy at higher cost (given the extremely rapid declines in the price of computer-related goods). Consider that almost 80 percent of total E-Rate funds were allocated to “Internal Connections,” which includes the cost of wiring schools. Had the subsidy not accelerated investments, many schools could have avoided the costs of physical infrastructure by using the now-common (and inexpensive) wireless networks.

Goolsbee’s and Guryan’s E-Rate tale may just be another lesson in the hell of unintended consequences; but most assuredly it should serve as another cautionary tale about federal interventions in education.

Judged solely as a policy to close the digital divide, the E-Rate program registers as a success…. Judged as a means of improving student performance, however, the E-Rate has shown little success on any testable measure.

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